Energy Storage in State Energy Efficiency Plans: Lessons from Massachusetts April 4, 2019 Todd Olinsky-Paul , Clean Energy Group (moderator) Liz Stanton and Bryndis Woods , Applied Economics Clinic
HOUSEKEEPING Join audio: Choose Mic & Speakers to use VoIP • Choose Telephone and dial using the information • provided Use the orange arrow to open and close your control panel Submit questions and comments via the Questions panel This webinar is being recorded. We will email you a webinar recording within 48 hours. This webinar will be posted on Clean Energy Group’s website at www.cleanegroup.org/webinars CLEAN ENERGY GROUP 2019 2
THE RESILIENT POWER PROJECT Increase public/private investment in clean, resilient power systems (solar+storage) • Protect low-income and vulnerable communities, with a focus on affordable housing and critical • public facilities Engage city, state and federal policy makers to develop supportive policies and programs • Visit www.resilient-power.org for more information and resources • CLEAN ENERGY GROUP 2019 4
SUPPORTING 100+ PROJECTS ACROSS THE COUNTRY Portland: Assessment of 10 LMI properties Boston Medical Center: including affordable One of the first hospitals housing, foodbanks, in the country to install medical centers, and storage for resiliency shelters California: Multiple housing properties DC: Largest representing hundreds of solar+storage units of affordable installation at housing affordable housing in the country Puerto Rico: Supporting the installation of solar+storage at more than 60 medical clinics CLEAN ENERGY GROUP 2019 5
WEBINAR SPEAKERS Liz Stanton Bryndis Woods Todd Olinsky-Paul Clinic Director & Senior Researcher, Applied Project Director, Clean Energy Group Economist, Applied Economics Clinic Economics Clinic CLEAN ENERGY GROUP 2019 6
Energy Storage in State Energy Efficiency Plans: Lessons from Massachusetts 4/4/19 Todd Olinsky-Paul Project Director Clean Energy Group
Energy Storage: The New Efficiency How States Can Use Efficiency Funds to Support Battery Storage and Flatten Costly Demand Peaks Published April 4, 2019 by Clean Energy Group www.cleanegroup.org/ceg-resources/resource/energy-storage-the-new-efficiency
Report does four things: 1. Explains how Massachusetts incorporated battery storage into its energy efficiency plan , and how other states can do the same 2. Discusses issues and best practices in battery incentive design 3. Introduces battery storage cost/benefit analysis 4. Assigns, for the first time, dollar values to seven non-energy benefits of storage (not included in previous BCRs) 1. Avoided power outages (combines 5. Avoided safety-related emergency value to customer and value to grid) calls 2. Higher property values 6. Job creation 3. Avoided fines 7. Less land used for power plants (expressed in acres) 4. Avoided collections / terminations 4
States Policy Landscape 1. Studies/Roadmaps MARKETS • CA, NY, MA, NM, RI, OR, VT, NJ, MN, MD, others 2. Grants/Demonstration projects • NY, NJ, MA, CA, WA, OR, VT, CT, Others 3. Longer-term programs • Utility procurement targets • CA, OR, MA, NY, NJ • Rebates/Other incentives • Rebates (CA, NJ, NY) • State tax incentives (MD) • Storage adder in solar incentive program (MA) • IRP reform (NM, WA) • Storage in EE plan (MA) 5
In Massachusetts, two conditions needed to be met before storage could be included in the efficiency plan: 1. Redefining efficiency. In order to include storage within the energy efficiency plan, Massachusetts first had to include demand reduction, a major application of battery storage, within the efficiency plan. 2. Showing that storage is cost-effective. In order for energy storage to qualify for the efficiency plan, it first had to be shown to be cost-effective. This meant that storage had to be able to pass a Total Resource Cost (TRC) test. 6
1. Redefining efficiency • Traditionally, electrical efficiency is defined as “using fewer electrons” • Storage does not normally qualify due to round trip losses • Massachusetts expanded the traditional definition of efficiency to include peak demand reduction • Storage is well-suited to shifting peak demand, something traditional passive efficiency measures don’t do Key concept: Not all load hours should be valued the same! Traditional efficiency reduces overall Peak demand reduction reduces peaks, consumption, but does not shift peaks but does not reduce net consumption 7
The monetizable value of storage is partly due to the high costs of our oversized grid The highest value of storage is in providing capacity to meet demand peaks… not in providing bulk energy. Peak Demand Is Costly Top 10% of hours = 40% total annual cost From Massachusetts State of Charge report White space = inefficiency in the system
Redefining efficiency • 2008: Massachusetts Green Communities Act requires that efficiency program administrators seek “…all available energy efficiency and demand reduction resources that are cost effective or less expensive than supply.” • 2016: Massachusetts State of Charge report notes that “ Storage and other measures that shift load are firmly covered by the intent of the [Green Communities] Act ” and adds, “The 2016 -2018 Statewide Energy Efficiency Investment Plan (“Three Year Plan”) identifies peak demand reduction as an area of particular interest …. Energy storage, used to shift and manage load as part of peak demand reduction programs, can be deployed through this existing process.” • 2018: Massachusetts “Act to Advance Clean Energy” specifically allows the use of energy efficiency funds to support the deployment of cost-effective energy storage “if the department determines that the energy storage system installed at a customer’s premises provides sustainable peak load reductions .” 9
2. Showing that storage is cost-effective To qualify for state energy efficiency plans, storage must pass a cost/benefit test CEG published independent economic analysis by AEC – July, 2018 10
Storage BCRs from Massachusetts EE plan PAs NOTE: These numbers do not include non-energy benefits! 11
Massachusetts Energy Efficiency Plan Incentive Structure • Storage measures are in new Active Demand Reduction program • Incentive is for performance (load reduction), not installation • New BTM storage is eligible (with or without renewable generation) • Residential and commercial customers may participate • Two programs offered: • Daily discharge - $200/kWh (demonstration program) • Targeted discharge - $100/kWh summer, $25/kWh winter (full program offering) • Incentive payment based on average load reduction during peak hours called by utility • Discharges will be called in three hour blocks • Incentive paid at end of each year or season • Utilities execute 5-year contract with customers • HEAT loans available for storage 12
Project Economics Example A commercial customer participating in the targeted dispatch program installs a 60 kW battery. Assuming perfect call response, 60 kW battery = 20 kw/hr load reduction averaged over 3-hour calls. Incentive payment calculation: Assuming a 60 kW battery (maximum 20 kW load reduction average): Summer payout = 20 kW x $100 = $2,000 Winter payout = 20 kW x $25 = $500 Annual revenue = $2,500 Note: a customer installing new solar+storage could qualify for energy efficiency performance incentive and the SMART solar rebate with storage adder Customers can participate in these programs while engaging in net metering and 13 demand charge management
Anticipated Results (Deployment) • Massachusetts 2019-2021 Energy Efficiency Plan includes BTM storage as a demand reduction measure • Incentive payments = ~$13 million over three years • Expected results = ~34 MW new behind-the-meter storage Shortcomings: • No enhanced incentive, financing or carve-out for low-income customers • No up-front rebate • Numerous omissions mean storage BCRs are likely too low • Daily discharge proposal downgraded to demonstration program • Cape Light Compact proposal was NOT approved as proposed 14
What states should do • Expand the definition of energy efficiency to include peak demand reduction • Energy efficiency program goals should include peak demand reduction goals • Fully integrate demand reduction measures, including battery storage, into state energy efficiency plans • Battery storage becomes an eligible technology • Develop battery storage or demand reduction incentives within the energy efficiency program • Incentives should include three basic elements: • Up-front rebate • Performance incentive • Access to financing • Incentives should include adders and/or carve-outs for low-income customers • Utility ownership should be limited • Third-party developers should be able to participate: • Market the program to customers • Provide private financing • Offer lease and PPA models • Aggregate capacity to meet program goals 15
• Adopt, adapt and build on the economics analysis presented here • Cost/benefit analyses of storage • Consider both the energy and the non-energy benefits of storage • Additional non-energy benefits of storage should be identified and valued Source: Rocky Mountain Institute 16
Massachusetts Energy Efficiency Plan: $2 Billion All State Energy Efficiency Investment: $9 Billion 17
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